Kukla's Korner Hockey

Category: NHL-Business-of-Hockey

In order to get a closer look at how the NHL’s salary structure is evolving, I took the 20-man rosters of all 30 teams from two time periods — early in the 2003-04 season and at the end of the regular season of 2006-07, this past campaign — and ran that 600-player sample through a spreadsheet.
So, what’s the difference between salaries prelockout and postlockout?

This season, the third under the salary-cap system the league adopted to end the lockout, the average salary will fly beyond that mark and approach $2.2 million.
The league isn’t concerned about that, because salaries are tied to revenue. If more money is going out, it can only mean more money is coming in.
“I don’t think this year’s free-agency period suggests a return to days when high-revenue clubs had a competitive advantage in the players marketplace,” NHL deputy commissioner Bill Daly said. “Aside from a couple of high-profile signings, the distribution of signings is significantly more diverse than under the CBA

Nationwide Arena in Columbus, Ohio, could be the model for a multipurpose facility to create jobs, housing and tax revenue in downtown Edmonton, says Lyle Best, chairman of the Arena Feasibility Committee.
He and five other committee members visited Columbus recently to see the benefits of thinking big.
In Edmonton, with about the same population as Columbus, “just an arena would not have much economic impact,” Best says. “It’s unlikely that just hockey and concerts could generate enough revenue.”

So what’s pushing values so high despite the NHL’s apparent downward trend in popularity in the United States and the fact that salary expenditures this coming season are equal those of the final season before the lockout?
The answer seems to be that, while NHL teams remain money-losing ventures in many cities, investors are attracted to businesses where they can at least project what those losses will be.
In other words, “cost certainty” - the buzz term of the 2004-05 lockout - apparently has a lot of value to both to those looking to buy into hockey as well as those cashing out.

If taxpayers don’t pay an additional $3 million per year to support the Nashville Predators hockey arena, a deal to keep the team in town could fall apart, the leader of a local buyers group said Thursday.
David Freeman, CEO of 36 Venture Capital and leader of the group, said the partners are working with the city to have the public money come from sources like sales tax generated by the hockey team.
“We are trying to identify revenue streams that reflect incentives associated with having the Predators in town,” Freeman said. “For example, sales tax revenues generated out of the arena are an appropriate revenue stream to consider donating to this cause because those revenues would disappear without the team.”
Freeman’s comments came late in the day, after Tennessean.com reported on a city analysis that said the buyers group was seeking Sommet Center lease changes that would cost taxpayers $5 million more per year at the city-owned facility.

The Predators have surpassed last season’s season ticket total.
The team finished Thursday with a total of 8,764 full-season ticket equivalents, topping the 8,758 the Predators finished with in 2005-06.
Predators vice president Steve Violetta said he feels confident Nashville can hit the 9,000 level by Labor Day, and added that ticket sales traditionally pick up in September, just before the season starts.

From the outside, it has tended to come across as irrational behavior. But to experts in sports economics, the recent surge of interest in NHL franchises is being interpreted as shrewd, calculated investment strategy that is likely to be emulated by others.
“The fundamentals that we’re being told about these teams certainly don’t support the sale prices we’re seeing, but the numbers don’t lie,” said John Vrooman, a Vanderbilt University economics professor who specializes in professional sports franchise valuations.
“The true value of a team is reflected more in the purchase price than it is in the rhetoric. Owners always poor mouth and say they’re losing money, yet these franchises appreciate at rates that make them a high-performing investment, way beyond what we would think.”

Salaries are on the rise, revenues are on the rise. And by all accounts, the value of an NHL franchise is on the rise, with the Tampa Bay Lightning having sold this week for a reported $200 million (all figures U.S.).
That has some folks within the sports business believing that hockey is making a comeback from the devastating lockout that cost it the 2004-05 season, about $2 billion in revenue and its stake as the fourth “major league” in North America.
But it has others believing that owners haven’t learned the lesson of out-of-control spending, likening the frenzied spending for franchises to the free-wheeling spending on free agents every July 1.

But despite the NHL’s many troubles — the rapidly escalating salaries, the lack of new revenue streams, the lack of a major U.S. television agreement — people are buying into commissioner Gary Bettman’s show. Not only that, they’re paying more and more money to do so….
This is all very strange. How can franchise values be going up at a time when the NHL looks to be struggling all over again?

How can the National Hockey League, so obviously struggling postlockout in many of its 24 American markets, with all of those empty seats and punchline television ratings, in fact be thriving as a business?
How can a no-loopholes salary cap attached to a percentage of overall revenues be soaring if commissioner Gary Bettman’s vision of the NHL is so clearly headed for the tank?
The answer lies with the almighty dollar — in this case, the Canadian dollar, which continues to ride high against the American greenback.

Nashville owner Craig Leipold has advised the NHL to no longer consider Jim Balsillie as a prospective owner of the team.
Sources say Leipold told the league the absence of a finalized sale agreement and Balsillie desire to move the franchise to Hamilton are the reasons for his decision.

It’s the second time Balsillie has been spurned in his efforts to buy an NHL team. He backed out of an earlier agreement to buy the Pittsburgh Penguins.
Balsillie had agreed to pay up to $238 million for the Predators. There was a deadline of June 30th put in place to complete the details of the sale.
Leipold, however, pulled the plug early.
Balsillie had already started putting the wheels in motion to move the team to Hamilton.
At a board of governors meeting in New York earlier this week, NHL commissioner Gary Bettman called talk of moving the Predators “premature.”